340B "MegaRule" on the Way

In 1992, the US government informed drug companies they needed to provide steep rebates to health centers that treat a large percent of poor patients. This government program, designed to enable certain safety-net healthcare facilities and medical clinics to save cash on pharmaceutical purchases is under fire from critics, who say the facilities are using that money for profits instead of aid patients.

The legislation received bipartisan support and it was a benefit for healthcare facilities and the federal government. In the ten years that followed, the drug discount program has certainly grown in leaps and bounds. But this spring as the feds have been composing fresh rules for the program, a battle royal has broken out between medical facilities and drug companies who say the program, named 340B, is now puffed up and poorly regulated.

"A federal program designed to allow certain safety-net hospitals and clinics to save money on drug purchases is under fire from critics, who say the facilities are using that money to pad profits rather than help patients. The 340B drug-pricing program lets thousands of hospitals, community health centers and family-planning clinics buy outpatient prescription medications from manufacturers at an estimated 25 to 50 percent discount. Participants can then charge higher rates to insured patients and keep the additional revenue." Read More 

Sometimes, rather than passing on drug discounts to individuals, medical centers offer the medicines at higher prices to their insured patients. The hospitals use the profits to finance clinics, personnel and additional services that the healthcare facilities point out benefit everybody. The law allows them to do that, the medical facilities point out, due to the fact that it's a means to stretch "scarce federal resources"-- a phrase which is in the law.

These obvious abuses have the drug manufacturers on the offensive. "Everyone sees this as a cash cow," says Maya Bermingham, vice president and senior counsel at Pharmaceutical Research and Manufacturers of America, a drug-industry business organization. "You can actually make money off of this program, and that was not really the intent of the program when it was originally formed.".

"The U.S. Dept. of Health & Human Services is moving forward with its plan to allow certain hospitals to receive discounts on orphan drugs when they are used for non-orphan conditions despite a court ruling that said the agency did not have the authority to do so." Read More

For all the disagreement, both equally the medical centers and the pharmaceutical manufacturers agree that the federal government ought to define or re-write the 340B rules. A new court judgment had brought into question whether the new rules would be introduced, but the federal Health Resources and Services Administration that supervises 340B is actually expected to introduce those new rules this month.